War Is About Oil, Experts Say, But Not About Cheap Gas

WASHINGTON
— `NO Blood for Oil!'' Antiwar demonstrators chant the slogan across the United States as Operation Desert Storm pounds Iraq. But is this really an American-led war for ``cheap gas,'' as critics charge?

Experts say the vast oil reserves of the Persian Gulf do play a central role in the war. Without them, America almost certainly would not be fighting.

The main issue, however, isn't the price of oil, they assert. Rather, it is the power that oil gives to leaders who control it, and the long-term consequences - military, economic, political - of that power in the Middle East.

At the same time, experts claim that even if Saddam controlled most of the oil in the Middle East, he would be unable to raise prices for very long above $30 a barrel. Though some observers speculate about ``$100 oil'' if Iraq overran Saudi Arabia, experts insist that such prices wouldn't stick.

``The vaunted oil weapon is a dud,'' says economist David Henderson. Saddam cannot impose large costs on the American economy, even if he maintained control over Kuwait, argues Dr. Henderson, who is associate professor of economics at the Naval Postgraduate School in Monterey, Calif.

Daniel Yergin, author of ``The Prize: The Epic Quest for Oil, Money &amp; Power,'' agrees that somewhere around $29 or $30 a barrel, oil prices bump into a natural ceiling. Above that, oil-importing nations like Germany and the US use substitutes, such as coal and natural gas, for power generation and other uses.

``There is no basis for an estimate that Iraq could maintain an oil price higher than about $30 a barrel,'' even if it controlled Saudi Arabia, says William Niskanen, a former member of President Reagan's Council of Economic Advisers.

``Cheap gas,'' however, does play an emotional role in this war, especially in Baghdad. Because of its long war with Iran, and its heavy purchases of military weapons, Iraq was nearly bankrupt when its troops marched into Kuwait on Aug. 2.

Saddam was angry that affluent Kuwait refused to cut production, which would have raised prices. Before Iraq seized Kuwait, oil was $15.50 a barrel. On Tuesday, the price of oil rose above $24 a barrel after Saddam's forces set Kuwaiti facilities ablaze.

Mixed signals from US diplomats may have encouraged Saddam to believe that America would wink at an attack on Kuwait.

For example, just a week before last summer's Iraqi invasion, US Ambassador April Glaspie and Saddam had the following conversation on the need to raise oil prices, according to a column by Jessica Mathews this week in the Washington Post:

``Glaspie: I would ask you to examine the possibility of not charging too high a price for oil.

``Saddam: We do not want too high prices for oil.... Twenty-five dollars a barrel is not a high price.

``Glaspie: We have many Americans who would like to see the price go above $25 because they come from oil-producing states.''

Ms. Mathews, a vice president of the World Resources Institute, argues that this looked like an invitation to seize Kuwait, or at least some of its disputed oil fields along the Iraqi border.

In ``The Prize,'' Yergin notes that Iraq's need for cash was desperate.

``The Iran-Iraq War, which Saddam Hussein had launched, had cost the country half a million deaths and serious casualties and had ended in a stalemate,'' Yergin writes. ``Yet a nation of 18 million was continuing to support a million-man army. Hussein wanted higher oil prices and very soon, for even as Iraq scoured the world for new, deadly, and sometimes bizarre weapons, it was having trouble paying its international bills.''

Higher prices - $25 vs. prewar levels around $15 - would be a boon to Iraq. It produces about 2 million barrels of oil a day. Adding $10 a barrel would add $20 million per day to Iraq's treasury, or $7.3 billion a year. Seizing Kuwait's oil fields, whose production equals Iraq's, would have pushed that even higher if Saddam's armies had not been challenged.

Experts say the great difficulty for Washington was not higher prices, but a shift of power to Saddam. US officials wondered what the Iraqi leader would buy with his new oil riches.

The fear here was that it would go for weapons, including nuclear and chemical warheads.